Stagnant stocks evidence of changing times
Print Edition
THE Shanghai Composite Index has struggled around 2,800 points for the past two weeks, and a look beneath the surface at companies’ performance sheets reveals the by-product of an uneven landscape.
The benchmark ended up 0.26 percent at 2,822.44 points yesterday, climbing from a two-and-half-month low of less than 2,800 points in early trading.
Driven by China’s restructuring efforts, high-tech and innovative industries posted rather encouraging results, while traditional industries did not fare so well.
Guangzhou Tinci Materials Technology Co, a lithium-ion battery material manufacturer, closed 3.7 percent higher at 56.97 yuan (US$8.70), continuing its upward trend. Its share price has almost doubled in the past 10 months.
Shares in Do-Fluoride Chemicals Co, another leading lithium-ion battery maker, doubled in less than two months from 53.05 yuan on March 11 to 106.15 yuan on May 6.
These examples, as a case in point, show the increasingly important role new industries — such as lithium-ion batteries and virtual reality or smart health care — are playing in economic growth.
In contrast, traditional sectors like nonferrous metals have seen their stock prices falter.
Stocks in Ansteel, for example, have slid from a peak of 8.89 yuan on June 19 to 3.75 yuan at yesterday’s close.
In contrast, Minmetals Development Co jumped 7.3 percent yesterday to 16.82 yuan, while China Molybdenum Co rose by the 10 percent daily limit to 3.71 yuan on its overseas acquisition deals worth 26.9 billion yuan.
These varied performances show growth weight is steadily moving from traditional to emerging industries as China has pushed to restructure.
Progress being made
Policy-makers are attempting to steer the economy away from a labor-intensive and credit-fueled growth model to one based on high-tech, innovation, stronger consumer spending and the service sector.
Macro-economic data in the first quarter provided more proof of the success of this effort. In the first three months, the high-tech industry expanded much faster than the industrial sector as a whole. Meanwhile, consumption now makes a bigger contribution than investment to China’s growth, accounting for more than 60 percent of its GDP.
Services continued to trump the contribution made by industry, expanding 7.6 percent and accounting for 56.9 percent of GDP, according to the latest official figures.
However, this does not mean that policy-makers will rest on their laurels and ignore outstanding difficulties such as excess capacity, housing overhang, and “zombie” state-owned enterprises with poor profitability.
Figures released on Wednesday showed that the combined profits of China’s non-financial state-owned enterprises in the first four months fell 8.4 percent year on year, while their debts surged 18 percent.
To tackle these difficulties, local governments are busy making and releasing detailed measures to implement supply-side structural reforms as authorities count on the move to counter ongoing economic headwinds and address the sticking points.
Authorities said the focus of the reforms should be destocking, de-leveraging, lowering corporate costs and improving weak links, given the growth model and consumption demand have changed fundamentally — from universal short supply to oversupply in some sectors, and from an emphasis of quantity to a preference for quality — after decades of economic reform.
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